A new theory of business says companies must stop trying to win if they are to last

When Microsoft launched the Zune, there was no grand vision that the product was helping to advance. They weren’t thinking about what possibilities the future might hold. It was just a competition for market share and money – one in which Microsoft wasn’t doing very well.

Ballmer’s prediction that the Zune could “beat” the iPod couldn’t have been more wrong. Debuting with a 9 percent market share, the Zune’s popularity declined steadily until it hit 1 percent in 2010. The
following year it was discontinued. The iPod, in contrast, enjoyed around a 70 percent slice for the same time period.

Some have argued that the Zune failed because Microsoft didn’t invest enough in advertising. But the theory doesn’t hold up. Spanx, Sriracha, and GoPro are just three brands that relied solely on word of mouth to increase brand awareness. All three not only emerged from obscurity without traditional advertising, but went on to thrive without it.

Others suggest that the Zune failed because Microsoft was too late to the MP3 player market. This theory doesn’t hold up much better. Apple itself introduced the iPod a full five years after MP3 players were a well-known product category. Brands like Rio, Nomad and Sony were already advancing the technology and selling well. Yet, within four years of its 2001 launch, the iPod had gained the lion’s share of the U.S. digital music player market...a number that only continued to rise.

As great as Microsoft’s Zune may have been, it wasn’t the design, marketing or the timing of the product that were the problem. It takes more than all those things to survive and thrive in the Infinite Game of business. Great products fail all the time. How a company is led must also be considered.

Prioritising comparison and winning above all else, finite-minded leaders will set corporate strategy, product strategy, incentive structures and hiring decisions to help meet finite goals. And with a finite mindset firmly entrenched in almost all aspects of the organisation, a sort of tunnel vision results. The result of which pushes almost everyone inside the company to place excessive focus on the urgent at the expense of the important.

Executives instinctively start to respond to known factors instead of exploring or advancing unknown possibilities. And in some cases, leaders can become so obsessed with what the competition is doing, falsely believing they need to react to their every move, that they become blind to a whole host of better choices to strengthen their own organisation. It’s like trying to win by playing defence. Seduced by a finite mindset, Microsoft found themselves in a never-ending game of whack-a-mole.

Microsoft’s leaders failed to appreciate the Infinite Game they were in and the infinite mindset with which Apple was playing. Though Steve Ballmer sometimes spoke of “vision” or the “long term,” like other finite-minded leaders who use this kind of infinite language, he almost always did so in the finite context of rank, stock performance, market share and money. Playing with the wrong mindset for the game they were in, Microsoft was chasing an impossible objective – “to win.” Wasting the will and resources needed to stay in the game, like America in Vietnam, Microsoft was in quagmire.

It seemed the company had not learned its lesson with the iPod. When the iPhone came out in 2007, Ballmer’s reaction to it underscored his finite perspective. Questioned about the iPhone in an interview, he scoffed, “There’s no chance that the iPhone is going to get any significant market share. No chance...They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I’d prefer to have our software in 60% or 70% or 80% of them, than I would to have 2% or 3%, which is what Apple might get.”

Constrained by a finite mindset, Ballmer was more focused on the relative numbers the iPhone could achieve instead of seeing how it might alter the entire market...or even completely redefine the role our phones play in our lives. In a turn of events that must have driven Ballmer crazy, after just five years on the market, iPhone sales alone were higher than all of Microsoft’s products combined.

In 2013, at his final press conference as CEO of Microsoft, Steve Ballmer summed up his career in a most finite-minded way. He defined success based on the metrics he selected within the time frame of his own tenure in the job. “In the last five years, probably Apple has made more money than we have,” he said. “But in the last thirteen years, I bet we’ve made more money than almost anybody on the planet. And that, frankly, is a great source of pride to me.”

It seems Ballmer was trying to say that under the thirteen years of his leadership, his company had “won.” Imagine how different that press conference could have been if, instead of looking back at a balance sheet, Ballmer shared all the things Microsoft had done and could still do to advance Bill Gates’s original infinite vision: “To empower every person and every organisation on the planet to achieve more.”

A finite-minded leader uses the company’s performance to demonstrate the value of their own career. An infinite- minded leader uses their career to enhance the long-term value of the company...and only part of that value is counted in money. The game didn’t end simply because Ballmer retired. The company continued to play without him. In the Infinite Game, how well he did financially is much less important than whether he left the company culture adequately prepared to survive and thrive for the next thirteen years. Or thirty-three years. Or three hundred years. And on that standard, Ballmer lost.

In the Infinite Game of business, when our leaders maintain a finite mindset or put too much focus on finite objectives, they may be able to achieve a number one ranking with an arbitrary metric over an arbitrary time frame. But that doesn’t necessarily mean they are doing the things they need to ensure that the company can keep playing for as long as possible. In fact, more often than not, the things they do harm the company’s inner workings and, without intervention, accelerate the company’s ultimate demise.

Excerpted with permission from The Infinite Game, Simon Sinek, Penguin Portfolio.